Present article deals with certain prominent amendments made/proposed in the Customs Act, 1962 (“Act”) and certain rules laid thereunder.

Number of Tribunals increased

In the last Budget, in order to reduce burden of stay applications on Tribunals, certain measures were taken. Such measures included, a pre-fixed amount of pre-deposit. In this Budget, Government has proposed to establish 11 (Eleven) new Benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) so that justice can be rendered faster. This step would definitely help speedy disposal of large number of pending cases.


Exemption from Duty

Section 25 of the Act granted discretionary power to the Government for exempting certain duties, if Government is of the opinion that such exemption of tax is required in public interest. Finance Bill, 2016 has amended this Section, stating that such exemption if notified by the Government shall come into effect on the date of such publication in the official gazette and shall not be required to be published or offered for sale on the date of its issue by the Directorate of Publicity and Public Relations of the Board, New Delhi as was a requirement prior to the amendment. Sub-section 5 of Section 25, which elaborated this process has now been deleted. Therefore, the amendment aimed to omit the requirement of publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC.

Extension of time limit to issue Show Cause Notice (Section 28)

Due to various reasons, the officers were not able to issue SCN within the stipulated period of one year. Also, there is provision in this Section, which provides grace period up to five years in extraordinary circumstances. However, the same can be invoked only if the assessee is involved in certain mala fide activities like: wilful misstatement, fraud, collusion, suppression of facts or wilful contravention of law to evade duty. In such cases, the onus is on the Department to prove mala fides on the part of the assessee. In order to raise SCNs beyond one year, though Departmental Officers used to allege such mala fides rampantly, it was difficult to prove such allegations resulting in failure of such SCNs raised belatedly.

Now, with the proposed amendment, the notice to be served to defaulter for duties not levied or not paid or short-levied or short-paid, the officer in-charge has been granted an extension of a year from the original section for providing the notice of Show-Cause (SCN). Therefore, the in-charge officer shall have two years at his disposal for serving the notice on the person chargeable with the duty or interest from the relevant date.

Interest rates reduced

Interest rate in case of delayed payment of duty has been reduced from 18% to 15%.

Deferred Payment

Section 47 of the Act lays down the procedure for payment of duty on goods used for home consumption.

The amendment has provided additional benefit of deferred payment to certain class of importers for any duty or charges laid down by the Government on them. The insertion of 47 (1) shall permit certain class of importers to make deferred payment of duty and additionally there shall be negative or reduced rate of interest upon the issuance of notification by the relevant department.

Similarly, the deferred payment, for duty or charges bestowed upon them, has been permitted for certain class of exporters by insertion of Section 51(1) in the Act. These classes of exporters shall be Notified by the Government from time to time.

Exemption of duty during transit of certain goods

Conveyance of goods mentioned in the import manifest or import report shall be permitted to be transported without payment of duty. The amendment has introduced certain criteria for transaction of goods without payment of duty. The authorised officer may lay down certain conditions as may be deemed fit for availing the advantage for non-payment of the duty.


Budget has given significant importance to the provisions relating to warehouse under Chapter XI of the Act. The physical control pertaining to private/public warehouses have been eased out and warehouse keepers shall be made more responsible via this amendment. The concept of special warehouses has been introduced in cases where the specific goods require physical control of the Government.

The definition of the warehouse under Section 2 (43)1 of the Act has undergone a change and has inserted the provision of Section 58 A in relation to licensing of special warehouse. These special warehouses will store specific goods under physical control of the department. The public and private warehouses will be controlled by warehouse keepers themselves under authority

Warehousing Station

Further, the Section 2(45) which defined the term warehousing station2 and Section 93 which lays down the provision in relation to warehouse station has been deleted. Section 9 had elaborately laid down the power of the concerned officer to declare the places to be warehousing stations at which alone public/private warehouses may be set up.

Therefore, private/public warehouses can be established at any place, as there is no need of having a declared warehouse station.

However, post removal of requirement pertaining to “warehousing station”, power to grant license for a public/private warehouse has been shifted from Assistant Commissioner of Customs or Deputy Commissioner of Customs, to Principal Commissioner or Commissioner of Customs.

Period for which goods can be stored in warehouse

Position prior to amendment:

i. Capital goods intended for use in any 100% (Hundred Percent) export oriented undertakings (EOU), till the expiry of 5 years

ii. Goods other than capital goods intended for use in any 100% EOU, till the expiry of 3 years.

Position post amendment

i. Capital goods intended for use in any 100% EOU/STP/EHTP/warehouse in which manufacturing is permitted, till their clerance from the warehouse.

Goods other than capital goods intended for use in any 100% EOU/STP/EHTP/warehouse in which manufacturing, till their consumption/clearance from the warehouse after the date of order permitting deposit of goods in warehouse.

Prior to the amendment goods intended to be used for export oriented undertaking only were permitted. The scope has broadened the facility for goods which can easily be placed in the warehouse. Now, the goods used for electronic hardware technology park (EHTP) unit or software technology park (STP) unit or any warehouse wherein manufacture or other operations have been permitted under Section 65, till their clearance from the warehouse can remain in the warehouse or till the consumption or clearance from the warehouse.

Responsibilities of the owner and customs officer over the warehouse

As per Section 62, customs officer was the managerial in-charge for the inflow and outflow of goods and the entire control over the warehoused goods vested upon him. Further, in case, the owner of the warehouse fails to make payment within 10 (ten) days from the due date to the warehouse keeper as obliged under Section 63 of the Act then the warehouse keeper is permitted to sell the warehoused good.

These two onerous Sections have been deleted while additional responsibilities have been carved out for warehouse keeper under Section 73 of the Act.

Responsibilities of Warehouse Keeper

The warehouse keeper has to be vigilant in following the legislation with respect to storage and transit of goods. After the amendment, the strict liability shall apply to warehouse keeper and the goods stored in the warehouse shall be considered in the custody of licensee or warehouse keeper. The licensee shall be liable for payment of duty, interest, fine and penalties without prejudice to any other action that may be taken against the licensee for improper removal of goods.

Section 73 has raised additional accountability on the warehouse keeper with regards to goods kept in the warehouse and he can’t evade the responsibilities conferred by the Act

Baggage Rule

Baggage Rules, 1998 will be replaced by the new Baggage Rules, 2016. These novel rules, shall come into effect on 1st April, 2016, propose the applicability of the Customs Baggage Declaration Regulations, 2013 only to those passengers who carry dutiable or prohibited goods. Amidst all these new rules, Government also proposes to simplify the provisions relating to restriction of baggage for international passengers. This rule shall be relaxed so as to enable the international passenger with more free baggage allowance. The filing of baggage declaration will be required only for those passengers who carry dutiable goods.


National Dialysis Services Programme

Under National health mission Government has proposed to exempt certain parts of dialysis equipment from basic customs duty, excise/ countervailing duty and special additional duty to provide dialysis services in all district hospital.

Further, the exemption on customs duty is proposed to be granted on braille paper to give it equal standing with other assistive devices like rehabilitation aids and other goods used by differently abled (Divyang) persons who attract nil basic customs duty.

Make in India

This flagship event of the Government has carved its way in the Budget as well. The Finance Bill, 2016 introduced certain inputs to reduce costs and improve competitiveness of domestic industry in sectors like Information Technology hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, maintenance repair and overhauling of aircrafts and ship repair. Moreover, Government has taken a number of steps to reduce the cargo release time and the transaction costs of EXIM trade.

The Customs Tariff Act, 1975

Government has proposed to amend the First Schedule to the Customs Tariff Act, 1975 so as to make it exhaustive and it shall include editorial changes in the Harmonized System of Nomenclature (HSN).


It appears that the amendments introduced in customs legislation are progressive and have tried to provide ‘ease’ of doing business in India, speed in litigation resolution, and simplify the procedures. However, whether it gets percolated to grassroot level of each citizen, only time will be able to depict.

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